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World's worst property market confronts Taiwan's new president

Thu, May 26, 2016 - 9:52 AM

Taiwan's home prices, which have fallen in the past year ending a decade-long bull run, are poised to extend declines as the economy contracts and a new presidential administration focuses on equitable wealth distribution.

PHOTO: BLOOMBERG

[TAIPEI] Taiwan's home prices, which have fallen in the past year ending a decade-long bull run, are poised to extend declines as the economy contracts and a new presidential administration focuses on equitable wealth distribution.

Home values in Taiwan dropped 1.2 per cent and transactions declined 15.5 per cent since the first quarter of 2015, according to data from the Interior Ministry, while capital Taipei was the world's worst property market in the year ended March among major cities tracked by Knight Frank LLP.

Tsai Ing-wen, the island's first female president who assumed office last week, pledged to fight a growing wealth gap and to provide affordable housing for younger generations.

"The first quarter hasn't been good; full-year transactions year-on-year will post single-digit declines and prices may fall by 10 per cent," Arisa Liu, an associate research fellow at the Taiwan Institute of Economic Research in Taipei, said by phone.

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Taiwan unveiled measures targeted at speculators after home prices as much as tripled since 2004 amid low mortgage rates. The central bank in 2010 started limiting the amount of funding property buyers can borrow, while a transaction tax of as much as 45 per cent, which takes into account both land and home values, took effect this year.

In the year through March, prices in Taipei fell 7.6 per cent to lead declines among 35 cities around the world, according to international property consultancy Knight Frank's most recent Prime Global Cities Index.

The drop was bigger than the 6 per cent slide in Hong Kong home prices in the period. The average price per square foot in Taipei fell 14 per cent from the second quarter of 2013, to the first quarter of this year, Knight Frank said.

Sentiment started slowing in late 2014 and in 2015 "the money started leaving," Billy Yen, Taipei-based managing director at DTZ Cushman Wakefield, said, referring to wealthy Taiwanese who started to invest outside of Taiwan.

In the wake of the new policies geared toward more affordable housing, would-be buyers found "the government is no longer friendly to the market," Mr Yen said.